Sebelius

Plaintiffs-appellants, the University of Washington Medical Center and seventeen other hospitals from Washington State (“Hospitals”), appeal the district court’s judgment upholding the Secretary of the Department of Health and Human Services’ (“Secretary”) exclusion of certain low-income populations from federal entitlement calculations. We affirm this judgment. Though the patients at issue in this case are mentioned in Washington’s Medicaid plan, they are not “eligible for medical assistance” under that plan.

BACKGROUND

A. Medicare and Medicaid

Medicare is a federally funded insurance program designed to cover older and disabled individuals. 42 U.S.C. § 1395 et seq. 1 Since the 1980s, Medicare has reimbursed hospitals primarily through the Prospective Payment System (“PPS”) based upon what it would cost an efficient hospital to treat a patient with a given diagnosis. Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. 324 (1982) (codified at 42 U.S.C. § 1395ww (2006)). However, the Medicare statute adjusts the PPS reimbursement to account for hospital-specific factors that may make a provider’s costs higher than average. 42 U.S.C. §…